/raid1/www/Hosts/bankrupt/TCRLA_Public/231219.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Tuesday, December 19, 2023, Vol. 24, No. 253
Headlines
A R G E N T I N A
ARGENTINA: Bonds Rise to 2-Year High After Milei Debuts Shock Plan
ARGENTINA: Shock Therapy Leaves Investors Craving More
ARGENTINA: To Ask for Waiver From IMF to Keep Agreement Afloat
B R A Z I L
REFINARIA DE MATARIPE: Moody's Assigns 'Ba3' CFR, Outlook Negative
C H I L E
CHILE: Fear of a Lower Credit Rating Lingers Over Bond Market
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: To Expand Trade Relations w/ Caribbean Nations
DOMINICAN REPUBLIC: World Bank OKs $225M Electricity Sector Project
P U E R T O R I C O
MACY'S INC: Akrhouse, Brigade Mount $5.8-Billion Buyout Bid
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A R G E N T I N A
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ARGENTINA: Bonds Rise to 2-Year High After Milei Debuts Shock Plan
------------------------------------------------------------------
Kevin Simauchi & Vinicius Andrade at Bloomberg News report that
Argentine bonds climbed to the highest in two years after President
Javier Milei's government unveiled the first batch of shock-therapy
measures intended to revive the economy.
Benchmark overseas notes due in 2035 added 1.3 cents to 34.9 cents
on the dollar, the strongest level since September 2021, according
to indicative price data compiled by Bloomberg. Other securities
also climbed, bolstered by speculation that the country may have a
path to jump-starting growth, as painful as the process may be for
ordinary Argentines.
The "shock therapy" package announced by Economy Minister Luis
Caputo included devaluing the peso by more than 50 percent, along
with massive cuts to government spending equivalent to almost three
percent of gross domestic product, Bloomberg News notes. Caputo
outlined plans to halve the number of ministries, cut transfers to
provinces and suspend public works projects, Bloomberg News relays.
Transport and energy subsidies would be slashed, with slight
increases to some social programs to try to blunt the impact,
Bloomberg News says.
"Investors are taking the announcements as the first steps on the
right direction," said William Snead, a strategist at BBVA in New
York. "There is a lot of enthusiasm - but the next couple of months
will be key. Inflation will spike and lower spending should have an
economic impact, then a reality check is due."
The drastic measures are intended to salvage an economy battered by
years of mismanagement and overspending, Bloomberg News discloses.
Argentina is headed to its sixth recession in a decade with
inflation raging above 140 percent, and more than 40 percent of the
population is mired in poverty, Bloomberg News relates.
Provincial bonds were little changed, with notes from Entre Rios
due in 2028 near 76 cents on the dollar, while 2029 bonds from
Cordoba hovered around 77 cents, Bloomberg News notes.
Argentine gains could be limited by concern among some investors
that the moves outlined last night don't go far enough, as well as
speculation that Milei will have difficulty pushing his ideas
through Congress, Bloomberg News says.
Hours after his televised comments, the Economy Ministry said
Argentina is targeting a slow weakening of the peso going forward,
about two percent per month, Bloomberg News relates.
"The initial focus on fiscal measures will provide comfort," said
Alejo Costa, chief Argentina strategist at Banco BTG Pactual SA.
However, investors will soon "demand additional details to
understand the full implications of the measures," Bloomberg News
adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its capital is Buenos Aires. Javier Milei is the current
president of Argentina after winning the November 19, 2023 general
election. He succeeded Alberto Angel Fernandez in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
The IMF's executive board completed on August 23, 2023, the fifth
and six reviews of Argentina's 30-month Extended Fund Facility
(EFF), and approved a US$7.5-billion disbursement to Argentina as
part of the larger program, which refinances payments Argentina
owes the institution from a previous bailout that failed to
stabilize the economy in 2018. Argentina would receive another IMF
disbursement in November of about US$2.75 billion pending another
staff-level agreement and board approval.
S&P Global Ratings, on June 13, 2023, raised its local currency
sovereign credit ratings on Argentina to 'CCC-/C' from 'SD/SD' and
0its national scale rating to 'raCCC+' from 'SD'. S&P also affirmed
its 'CCC-/C' foreign currency sovereign credit ratings on
Argentina. The outlook on the long-term ratings is negative. S&P's
'CCC-' transfer and convertibility assessment is unchanged. None of
its rated bond issues are affected.
S&P said the negative outlook on the long-term ratings is based on
the risks surrounding pronounced economic imbalances and policy
uncertainties before and after the 2023 national elections.
Divisions within the government coalition, and infighting among the
opposition, constrain the sovereign's ability to implement timely
changes in economic policy.
Fitch Ratings also upgraded on June 13, 2023, Argentina's Long-Term
Foreign Currency (FC) Issuer Default Rating (IDR) to 'CC' from
'C'and affirmed the Long-Term Local Currency (LC) IDR at 'CCC-'.
Fitch typically does not assign Outlooks to sovereigns with a
rating of 'CCC+' or below.
The upgrade of the FC IDR reflects that Fitch no longer deems a
default-like process to have begun, as the authorities have not
signaled a clear intention to follow through with an intra-public
debt swap announced in March. The new 'CC' rating signals a default
event of some sort appears probable in the coming years, regardless
of the outcome of upcoming elections. The affirmation of the LC IDR
at 'CCC-' follows the peso debt swap in June that Fitch did not
deem to be a "distressed debt exchange" (DDE).
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer
Rating at CCC and downgraded its Long-Term Local Currency Issuer
Rating to CCC from CCC (high) on March 3, 2023.
ARGENTINA: Shock Therapy Leaves Investors Craving More
------------------------------------------------------
Buenos Aires Times reports that just two days after taking office,
Javier Milei's government announced 10 new measures to pull
Argentina's economy out of its funk. It may prove too little for
investors who have been sending the country's assets rallying on
the firebrand president's promises, according to Buenos Aires
Times.
The first steps of a promised "shock therapy" package announced by
Economy Minister Luis Caputo included devaluing the currency to 800
per dollar, from a current 366.50, the report notes. That's still
short of the more than 1,000 parallel rate Argentines use to skirt
currency controls, the report relays. Milei also wants to halve
the number of ministries, cut transfers to provinces and suspend
public works, and plans to reduce subsidies on transport and energy
sectors while boosting certain social welfare program, the report
discloses.
While investors agree the adjustment outlined is the best - and
only - way forward for the troubled nation, they were left wanting
some bolder moves, more details about the plan and how Milei plans
to implement measures that require Congress support and are
potentially disruptive to Argentines, the report discloses.
Hours after Caputo's televised comments, the Economy Ministry
provided more details on their spending cuts, monetary policy and
currency framework, saying Argentina is targeting a two-percent
peso devaluation per month and that planned spending cuts are
equivalent to 2.9 percentage points of GDP, the report says. The
Central Bank is expected to make an announcement on monetary
policy, the report says.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its capital is Buenos Aires. Javier Milei is the current
president of Argentina after winning the November 19, 2023 general
election. He succeeded Alberto Angel Fernandez in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
The IMF's executive board completed on August 23, 2023, the fifth
and six reviews of Argentina's 30-month Extended Fund Facility
(EFF), and approved a US$7.5-billion disbursement to Argentina as
part of the larger program, which refinances payments Argentina
owes the institution from a previous bailout that failed to
stabilize the economy in 2018. Argentina would receive another IMF
disbursement in November of about US$2.75 billion pending another
staff-level agreement and board approval.
S&P Global Ratings, on June 13, 2023, raised its local currency
sovereign credit ratings on Argentina to 'CCC-/C' from 'SD/SD' and
0its national scale rating to 'raCCC+' from 'SD'. S&P also affirmed
its 'CCC-/C' foreign currency sovereign credit ratings on
Argentina. The outlook on the long-term ratings is negative. S&P's
'CCC-' transfer and convertibility assessment is unchanged. None of
its rated bond issues are affected.
S&P said the negative outlook on the long-term ratings is based on
the risks surrounding pronounced economic imbalances and policy
uncertainties before and after the 2023 national elections.
Divisions within the government coalition, and infighting among the
opposition, constrain the sovereign's ability to implement timely
changes in economic policy.
Fitch Ratings also upgraded on June 13, 2023, Argentina's Long-Term
Foreign Currency (FC) Issuer Default Rating (IDR) to 'CC' from
'C'and affirmed the Long-Term Local Currency (LC) IDR at 'CCC-'.
Fitch typically does not assign Outlooks to sovereigns with a
rating of 'CCC+' or below.
The upgrade of the FC IDR reflects that Fitch no longer deems a
default-like process to have begun, as the authorities have not
signaled a clear intention to follow through with an intra-public
debt swap announced in March. The new 'CC' rating signals a default
event of some sort appears probable in the coming years, regardless
of the outcome of upcoming elections. The affirmation of the LC IDR
at 'CCC-' follows the peso debt swap in June that Fitch did not
deem to be a "distressed debt exchange" (DDE).
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer
Rating at CCC and downgraded its Long-Term Local Currency Issuer
Rating to CCC from CCC (high) on March 3, 2023.
ARGENTINA: To Ask for Waiver From IMF to Keep Agreement Afloat
--------------------------------------------------------------
Buenos Aires Times reports that Argentina will ask the
International Monetary Fund (IMF) for a waiver for breaches of its
ongoing US$44.5-billion programme in order to keep it afloat and to
move forward with a new reformulation of maturities and
disbursements.
The detail was informed by the Central Bank in a press release
accounting for the general guidelines of the entity in this new
stage.
"We have started and rapidly progressed in the formal dialogue with
international bodies, including the International Monetary Fund.
The core goal is to remove any uncertainty around the agreed-on
disbursements with a view to attending to future capital
maturities," said the BRCA.
In that vein, it stressed that "this uncertainty accounts for the
obligation facing Argentina to start the formal process to request
a waiver for the breaches in August this year."
"The Government will strive to reinstate the effectiveness of the
agreement signed with the IMF and carry out additional negotiations
it considers will contribute to improving the financing conditions
currently in force," the monetary authority underlined.
Argentina's economic team also revealed that an upcoming
US$900-billion maturity due December 21 will be settled with funds
from the CAF Development Bank of Latin America and the Caribbean,
notes the report.
Strong backing
The moves come after IMF staff offered strong support for
Argentina's steep currency devaluation and move to cut government
spending, Buenos Aires Times relays. In remarks issued almost
immediately after Economy Minister Luis Caputo unveiled the
measures, IMF staff said the moves would "restore stability" to the
crisis-ridden country.
"I welcome the decisive measures announced by President [Javier
Milei] and his economic team to address Argentina's significant
economic challenges—an important step toward restoring stability
and rebuilding the country's economic potential," said IMF Managing
Director Kristalina Georgieva in a post on the X social network,
the report relates.
In parallel, IMF spokeswoman Julie Kozack released a positive
statement to the press:
"IMF staff welcome the measures announced earlier by Argentina's
new Economy Minister, Luis Caputo. These bold initial actions aim
to significantly improve public finances in a manner that protects
the most vulnerable in society and strengthen the foreign exchange
regime. Their decisive implementation will help stabilise the
economy and set the basis for more sustainable and private-sector
led growth," said Kozack.
"IMF staff and the new Argentine authorities will work
expeditiously in the period ahead. Following serious policy
setbacks over the past few months, this new package provides a good
foundation for further discussions to bring the existing
Fund-supported programme back on track," she added.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its capital is Buenos Aires. Javier Milei is the current
president of Argentina after winning the November 19, 2023 general
election. He succeeded Alberto Angel Fernandez in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
The IMF's executive board completed on August 23, 2023, the fifth
and six reviews of Argentina's 30-month Extended Fund Facility
(EFF), and approved a US$7.5-billion disbursement to Argentina as
part of the larger program, which refinances payments Argentina
owes the institution from a previous bailout that failed to
stabilize the economy in 2018. Argentina would receive another IMF
disbursement in November of about US$2.75 billion pending another
staff-level agreement and board approval.
S&P Global Ratings, on June 13, 2023, raised its local currency
sovereign credit ratings on Argentina to 'CCC-/C' from 'SD/SD' and
0its national scale rating to 'raCCC+' from 'SD'. S&P also affirmed
its 'CCC-/C' foreign currency sovereign credit ratings on
Argentina. The outlook on the long-term ratings is negative. S&P's
'CCC-' transfer and convertibility assessment is unchanged. None of
its rated bond issues are affected.
S&P said the negative outlook on the long-term ratings is based on
the risks surrounding pronounced economic imbalances and policy
uncertainties before and after the 2023 national elections.
Divisions within the government coalition, and infighting among the
opposition, constrain the sovereign's ability to implement timely
changes in economic policy.
Fitch Ratings also upgraded on June 13, 2023, Argentina's Long-Term
Foreign Currency (FC) Issuer Default Rating (IDR) to 'CC' from
'C'and affirmed the Long-Term Local Currency (LC) IDR at 'CCC-'.
Fitch typically does not assign Outlooks to sovereigns with a
rating of 'CCC+' or below.
The upgrade of the FC IDR reflects that Fitch no longer deems a
default-like process to have begun, as the authorities have not
signaled a clear intention to follow through with an intra-public
debt swap announced in March. The new 'CC' rating signals a default
event of some sort appears probable in the coming years, regardless
of the outcome of upcoming elections. The affirmation of the LC IDR
at 'CCC-' follows the peso debt swap in June that Fitch did not
deem to be a "distressed debt exchange" (DDE).
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer
Rating at CCC and downgraded its Long-Term Local Currency Issuer
Rating to CCC from CCC (high) on March 3, 2023.
===========
B R A Z I L
===========
REFINARIA DE MATARIPE: Moody's Assigns 'Ba3' CFR, Outlook Negative
------------------------------------------------------------------
Moody's Investors Service has assigned a Ba3 corporate family
rating to Refinaria de Mataripe S.A. (Acelen) and affirmed the Ba3
rating to MC Brazil Downstream Trading S.A.R.L.'s (MC Brazil)
Backed Senior Secured Global Notes, fully guaranteed by Acelen.
Moody's assigned a negative outlook to Acelen and maintained MC
Brazil's negative outlook.
RATINGS RATIONALE
Acelen's Ba3 rating reflects the Mataripe refinery (RefMat)'s
strong asset features, its competitive position and strategic
location in Northeast of Brazil that have been key for the company
to successfully practice international parity prices (IPP). It also
considers the sponsor profile, with a long track record investing
in the refining and petrochemical business, and Acelen's new
management team with solid industry expertise to execute on the
company's growth strategy. Finally, Acelen's good liquidity
position is an additional credit strength, which provides a leeway
for the company to finish its investment plans and fully collect
the benefits of its commercial strategy.
The rating remains constrained by Acelen's significant exposure to
merchant risk, volatility in crack spreads and low visibility into
the future offtake profile and fuel prices, leading to reduced
predictability of future cash flows. It is also limited by the
execution risk related to its capex plan and the achievement of
targeted efficiency savings, and by its concentration in a single
asset.
After taking over the operations of the refinery in late 2021,
Acelen has conducted an extensive capital expenditure plan, with
over $260 million investment in 2022 and a further $160 million
investment expected for 2023. These investments were directed to
unclog production bottlenecks, improve production mix towards
higher margin products and reduce utility, logistics and fixed
costs. As a result of these investments, Acelen expects to improve
earnings before interests, taxes, depreciation and amortization
(EBITDA) by $5.6 per barrel; some of which already reflected in the
third quarter of 2023 results.
Acelen has recently faced a challenging operating environment which
has resulted in weaker than expected financial performance. In the
last quarter of 2022, the more severely affected quarter, the
company reported an adjusted EBITDA per barrel of $-5.9, a
combination of an adjusted crack margin of $6.4 and costs of $12.2
per barrel. Since then, investments made in the company have
gradually translated into improving margins and cash flow
generation. As of the third quarter of 2023, EBITDA have reached
$+2.1 per barrel combining an adjusted crack margin of $10.6 and
costs of $8.4 per barrel. Despite the encouraging improvements,
financial performance has remained short of Moody's initial
expectations, that aimed at an EBITDA of $+5.8 per barrel for 2023,
including an adjusted crack margin of $11.6 and costs of $5.9 per
barrel.
As of September 2023, the company had $371 million in cash,
including $90 million in the debt service reserve account (DSRA),
and a further $130 million in tax credits that the company will
monetize in the last quarter of 2023. The company also has around
$1.1 billion in contracted credit lines to support crude oil
purchases, with $645 million committed with foreign banks, and $462
million committed with local banks. Acelen's strong liquidity
position provides a leeway while the company fully implements its
strategy and strengthen its cash generation profile, by completing
the ramp-up of its capex program and collecting the benefits of its
cost savings initiatives.
RATING OUTLOOK
The negative outlook reflects the risks of delays in the company's
pace of recovery for a sustainable cash generation, incorporating
cost efficiency savings after the full ramp-up of its investment
plan and the full implementation of its revised commercial
strategy, which could entail higher risks than suggested in the
current Ba3 rating.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
A ratings upgrade is unlikely to happen at this point given the
negative outlook. The outlook could be stabilized if current credit
risks settle, with increased cash flow generation and EBIT over
total throughput barrels stabilizing above $3 (-$3.3 in the twelve
months ended September 2023) on a sustainable basis and interest
coverage ratio calculated as EBIT over interest expense remains
over 3.5x (-1.1x in the twelve months ended September 2023).
Conversely, ratings could be downgraded upon exacerbation of
current credit risks, leading to a frustration in cash generation
such that EBIT over total throughput barrels and interest coverage
ratio remains, respectively below $2 and 2.5x on a sustainable
basis. The maintenance of the debt service coverage ratio (DSCR)
sustained below 2.5x (3.0x in the twelve months ended September
2023) could also lead to a downgrade of the rating.
ISSUER PROFILE
Refinaria de Mataripe S.A. is a refinery cluster built in 1950,
with current operating processing capacity of 302,000 barrels per
day (bpd) of crude and storage capacity of 3.7 million for crude
and 6.2 million for refined products. The company also encompasses
a logistic infrastructure including 679 kilometers of oil pipelines
and the TEMADRE marine terminal. With total assets of $3.8 billion
and annual revenue of $8.8 billion as of September 2023, Acelen is
the primary supplier of oil-refined products in the northeast and
north regions in Brazil.
MC Brazil Downstream Trading S.A.R.L. (MC Brazil) is a private
limited liability company established under the laws of Luxembourg
and fully owned by Acelen.
The principal methodology used in these ratings was Refining and
Marketing published in August 2021.
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C H I L E
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CHILE: Fear of a Lower Credit Rating Lingers Over Bond Market
-------------------------------------------------------------
Bloomberg News reports that as a deeply divisive re-write of
Chile's constitution comes to an end, interest rates fall and
economic growth returns it seems that Chile's bond market is
regaining its mojo.
But there may be one final sting in the tail from the last three
years of social, political and economic turbulence, Bloomberg News
reported.
All 14 analysts and traders in a Bloomberg survey expect rating
firms to downgrade their outlook on Chilean bonds, or lower the
rating some time next year as the debt-to-gross domestic product
ratio rises, the report notes.
"As things stand, downward pressure on our sovereign risk rating is
likely to persist, first with adjustments to the outlook, and then,
over time, negative rating actions," said Andres Perez, chief
economist for Latin America at Banco Itau, the report relays.
"Fitch is likely to revise our outlook in the near term."
Any downgrade would dampen confidence in the sustainability of a
rebound in Chilean bonds, notes the report. The yield gap with US
Treasuries has narrowed more than any other A-rated country in the
world this year, dropping 38 basis points through Dec. 6, as
inflation slowed and fiscal stability returned after a splurge in
spending during the pandemic, according to data compiled by
Bloomberg. But the continuation of that outperformance is under
threat, the report adds.
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D O M I N I C A N R E P U B L I C
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DOMINICAN REPUBLIC: To Expand Trade Relations w/ Caribbean Nations
------------------------------------------------------------------
Dominican Today reports that given the diplomatic conflict
affecting trade relations between the Dominican Republic and Haiti,
the vision of the officials heading the administration of President
Luis Abinader is to establish agreements with the other countries
of the Caribbean Region.
For this reason, the Minister of Economy Planning and Development
(MEPYD), Pavel Isa Contreras, considered that the primary strategy
to guarantee the development of micro, small, and large enterprises
(Mipimes) is to diversify connections with nearby markets,
according to Dominican Today.
"The important lesson we have to learn is (about the problem with
Haiti) we have to diversify markets. Do not put your eggs in one
basket, but in many," said the official.
Isa Contreras assured us that by applying this parameter, the
performance of Dominican economic sectors will not be affected by
the fragilities of other nearby markets, the report relays.
"The Caribbean has a potential for our exports to intensify and not
be subject to the uncertainties generated by some markets," said
the economist, referring to the precariousness of the neighboring
country, the report notes.
Contreras explained that the countries with the most fortified
markets are Guyana, Jamaica, Trinidad and Tobago, St. Vincent and
the Grenadines, St. Lucia, St. Kitts, and the Bahamas, the report
discloses.
These would be a great option due to the number of tourists these
countries receive, representing an attractive public for Dominican
products, the report says.
Pavel Isa Contreras' statements were made during the "More
Caribbean trade-strengthening SME exports to the Caribbean" event
at the Dominican Republic Export and Investment Center
(ProDominicana), the report says.
This activity aimed to promote and inform about the exports of
Dominican SMEs to the Caribbean market, the report notes.
In addition, it disseminates existing initiatives on the subject,
highlighting strategic opportunities and addressing the challenges
SMEs face in their export efforts in the Caribbean region, the
report discloses.
Biviana Riveiro, executive director of ProDominicana, indicated
that the Dominican Republic has positioned itself in the last five
years as the leading economy, with the most significant trade
exchange of the insular Caribbean with the world, accumulating
figures over USD$173.4 billion, the report relates.
Riveiro recalled that in 2019-2022, the country accumulated a trade
exchange with the Caribbean for more than USD$9.12 billion, of
which Dominican exports represent 78%, the report notes.
He said a comprehensive strategy had been executed, including
participation in 24 trade fairs and missions to continue increasing
Dominican export rates, the report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCR-LA reported in April 2019 that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
On December 4, 2023, the TCR-LA reported that Fitch Ratings has
affirmed Dominican Republic's Long-Term Foreign-Currency Issuer
Default Rating (IDR) at 'BB-' and revised the Outlook to Positive
from Stable. Fitch says the Positive Outlook reflects a trend
improvement in governance, and robust growth prospects that should
lead to continued gains in per capita income. According to Fitch,
growth has decelerated in 2023, but it expects Dominican Republic
to recover to high levels during 2024-2025. External liquidity
metrics have improved in recent years, and foreign currency share
of government debt is on a downward path.
In August 2023, Moody's Investors Service changed the outlook on
the Government of Dominican Republic's ratings to positive from
stable and affirmed the local and foreign-currency long-term issuer
and senior unsecured ratings at Ba3. Moody's said the key drivers
for the outlook change to positive are: (i) sustained high growth
rates have enhanced the scale and wealth levels of the economy; and
(ii) a material decline in the government debt burden coupled with
improved fiscal policy effectiveness will support medium-term debt
sustainability.
The affirmation of the Ba3 ratings balances the Dominican
Republic's strong economic growth dynamics and relatively contained
susceptibility to event risks, with a comparatively weaker fiscal
position, reflecting long-standing credit challenges which include:
(i) a shallow revenue base compared to peers, (ii) weak debt
affordability metrics, and (iii) high exposure to foreign currency
borrowing.
S&P Global Ratings, in December 2022, raised its long-term foreign
and local currency sovereign credit ratings on the Dominican
Republic to 'BB' from 'BB-'. The outlook on the long-term ratings
is stable. S&P affirmed its 'B' short-term sovereign credit
ratings. S&P also revised its transfer and convertibility (T&C)
assessment to 'BBB-' from 'BB+'. The stable outlook reflects S&P's
expectation of continued favorable GDP growth and policy continuity
over the next 12-18 months that will likely stabilize the
government's debt burden.
In February 2023, S&P said its BB ratings reflect the country's
fast-growing and resilient economy. It also incorporates the
country's historical political and social challenges in passing
structural reforms to contain fiscal deficits, despite recent
improvements in the electricity sector. The ratings are constrained
by relatively high debt, a hefty interest burden, and limited
monetary policy flexibility.
DOMINICAN REPUBLIC: World Bank OKs $225M Electricity Sector Project
-------------------------------------------------------------------
Dominican Today reports that the World Bank has greenlit a new
initiative in the Dominican Republic, investing $225 million to
enhance the country's electricity sector.
This project aims to significantly reduce the high distribution
losses in electricity by rehabilitating distribution networks,
upgrading management technology, and curtailing power outages,
according to Dominican Today. Approximately 813,000 consumers,
spanning both urban and rural areas in residential and commercial
sectors, are anticipated to benefit from these improvements, the
report notes.
The Dominican Republic's electricity sector has been grappling with
substantial losses, primarily due to outdated and overloaded
distribution lines, illegal connections, metering issues, and
inaccurate billing and consumption estimates, the report relays.
These losses have averaged $1.2 billion annually over 2017-2021,
equating to 1.4 percent of the nation's GDP, the report discloses.
The ongoing fiscal support to electricity distribution companies to
offset these losses has been a strain on public finances, the
report says. Reducing these subsidies will free up more resources
for social programs and human development initiatives, the report
relays.
The Distribution Efficiency Improvement and Service Strengthening
Project will bolster the Dominican Government's efforts to tackle
these issues, the report relays. The project will collaborate with
Edenorte, Edesur, and Edeeste (EDE) – the trio of state-owned
companies handling the majority of electricity distribution – to
revamp electrical infrastructure and modernize business processes,
the report notes. This will enhance the EDEs' financial
sustainability, the report discloses.
Alexandria Valerio, the World Bank Representative for the Dominican
Republic, commended the government's proactive approach to
addressing longstanding electricity sector challenges, the report
relays. The World Bank pledges continued support to foster a more
reliable, less carbon-dependent electricity supply, crucial for the
country's productivity growth, poverty reduction, and overall
well-being, the report says.
The report notes that key project outcomes include the
rehabilitation of 1,342 kilometers of lines, regularization of
225,826 non-paying electricity consumers, meter replacements and
installations, and improvements in commercial and measurement data
management systems for the EDEs. This will lead to improved
billing, collections, and increased revenues, minimizing losses and
reducing government subsidy dependency, the report relays.
Additionally, the project will alleviate overloaded transformers
and renovate aging infrastructure, thus reducing reliance on fossil
fuels and contributing to lower greenhouse gas emissions, the
report says.
This initiative marks the first of three planned World Bank
investments, supporting the Dominican Government's vision for the
sustainable development of the electricity sector, the report
discloses. The multiphase program, envisioned for a ten-year span,
proposes a total estimated financing of $505 million, the report
relays. The overarching goal is to enhance access to a more
reliable, efficient, and environmentally sustainable electricity
supply for the entire Dominican population, the report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCR-LA reported in April 2019 that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
On December 4, 2023, the TCR-LA reported that Fitch Ratings has
affirmed Dominican Republic's Long-Term Foreign-Currency Issuer
Default Rating (IDR) at 'BB-' and revised the Outlook to Positive
from Stable. Fitch says the Positive Outlook reflects a trend
improvement in governance, and robust growth prospects that should
lead to continued gains in per capita income. According to Fitch,
growth has decelerated in 2023, but it expects Dominican Republic
to recover to high levels during 2024-2025. External liquidity
metrics have improved in recent years, and foreign currency share
of government debt is on a downward path.
In August 2023, Moody's Investors Service changed the outlook on
the Government of Dominican Republic's ratings to positive from
stable and affirmed the local and foreign-currency long-term issuer
and senior unsecured ratings at Ba3. Moody's said the key drivers
for the outlook change to positive are: (i) sustained high growth
rates have enhanced the scale and wealth levels of the economy; and
(ii) a material decline in the government debt burden coupled with
improved fiscal policy effectiveness will support medium-term debt
sustainability.
The affirmation of the Ba3 ratings balances the Dominican
Republic's strong economic growth dynamics and relatively contained
susceptibility to event risks, with a comparatively weaker fiscal
position, reflecting long-standing credit challenges which include:
(i) a shallow revenue base compared to peers, (ii) weak debt
affordability metrics, and (iii) high exposure to foreign currency
borrowing.
S&P Global Ratings, in December 2022, raised its long-term foreign
and local currency sovereign credit ratings on the Dominican
Republic to 'BB' from 'BB-'. The outlook on the long-term ratings
is stable. S&P affirmed its 'B' short-term sovereign credit
ratings. S&P also revised its transfer and convertibility (T&C)
assessment to 'BBB-' from 'BB+'. The stable outlook reflects S&P's
expectation of continued favorable GDP growth and policy continuity
over the next 12-18 months that will likely stabilize the
government's debt burden.
In February 2023, S&P said its BB ratings reflect the country's
fast-growing and resilient economy. It also incorporates the
country's historical political and social challenges in passing
structural reforms to contain fiscal deficits, despite recent
improvements in the electricity sector. The ratings are constrained
by relatively high debt, a hefty interest burden, and limited
monetary policy flexibility.
=====================
P U E R T O R I C O
=====================
MACY'S INC: Akrhouse, Brigade Mount $5.8-Billion Buyout Bid
-----------------------------------------------------------
As widely reported, an investor group consisting of Arkhouse
Management and Brigade Capital Management has made a $5.8 billion
offer to take department store chain Macy's private.
Arkhouse Management, a real estate investment firm, and Brigade
Capital, a global asset manager, submitted a bid to buy Macy's for
$21 a share, valuing Macy's at $5.8 billion, the Wall Street
Journal reported. The deal would pay shareholders a 32% premium
above Macy's closing price Friday on Dec. 8, 2023.
Reuters notes that the investor group already has a big stake in
Macy's through Arkhouse-managed funds and has discussed the
proposal with the department store chain, whose board subsequently
met to discuss the offer. It is not clear how the retailer views
the proposal, the person familiar with the matter said.
The Wall Street Journal reported that the investor consortium
believes that public markets have undervalued Macy's and may be
willing to increase the offer further. An investment bank has
reportedly offered a letter confirming the bidders have the funds
to complete the buyout.
"The buyout group is undoubtedly interested in Macy's large real
estate portfolio, which has attracted activists and potential
buyers in the past," Morningstar analyst David Swartz said in a
note.
J.P. Morgan analysts estimate Macy's total real estate value at
about $8.5 billion, or $31 per share, including the iconic Herald
Square property worth about $3 billion.
The retailer crushed analysts' estimates for quarterly profit on
lower inventories and strong demand for beauty products in
November, signaling that attempts to trim inventory from 2022 highs
were finally working ahead of the all-important holiday shopping
season.
Macy's has a market capitalization of about $4.77 billion and its
shares are down nearly 15.79% this year.
It is unclear whether Arkhouse and Brigade have the resources to
execute on a deal of such a size, given that they have not
previously done anything of this magnitude.
A $2.4 billion bid that a group of investors led by Arkhouse
submitted two years ago for real estate investment trust Columbia
Property Trust was unsuccessful. Pimco subsequently acquired
Columbia Property for $3.9 billion.
* * *
Michael Tobin of Bloomberg News reports that the proposed leveraged
buyout of Macy's Inc. is a reminder that retail has been a
notoriously tough sector for private equity, with debt of companies
that were taken private in recent years falling to distressed
levels.
Many bonds issued by Michael Cos., At Home Group Inc. and Staples
Inc. carry triple-C ratings and trade below 80 cents on the dollar
following the firms' deals with private equity sponsors. The
retailers' operations were pressured before the transactions,
meaning the subsequent debt left them with unsustainable leverage,
according to Bloomberg Intelligence analyst Mike Campellone.
FORTUNE notes that retailers have lagged the overall rally in U.S.
stocks this year as investors worry higher interest rates will damp
spending and as the companies struggled to maintain the pace of
growth seen during the pandemic. Department stores in particular
have been confronting a broader shift in consumer habits as
shoppers gravitate toward specialty and off-mall retail.
About Macy's Inc.
New York-based Macy's Inc. -- https://www.macysinc.com/ -- is an
omnichannel retail company that operates department stores,
websites and mobile applications.
As of October 2022, Macy's Inc. operates 722 locations in the
United States, Guam, and Puerto Rico. Macys Inc. owns the
department store chain Macy's, the more expensive department store
brand Bloomingdale's, and the beauty chain Bluemercury.
Macy's department stores are among the most high-profile in the
U.S. because of its sponsorship of a parade on Thanksgiving Day
that has run since 1924, with giant floats and balloons featuring
popular cartoon characters. The Macy's top outlet in New York's
Herald Square is one of the world's biggest department stores.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2023. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
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